Energizer Holdings, Inc.

ENR Details

Energizer Holdings, Inc. (NYSE: ENR) is one of the leading primary batteries and portable lighting products globally. Its key global brands include Energizer, EVEREADY, Rayovac, and VARTA.

Result Performance for the First Quarter Ended 31 December 2021 – (Q1FY22)

• The net sales stood at $846.3 million in Q1FY22, primarily driven by pricing action for battery and auto care businesses, resulting in ~2% of organic growth. Also, new distribution across the battery and auto care, particularly in North America, contributed ~1% to organic growth.
• The gross margin stood at 36.8% in Q1FY22 versus 39.8% in Q1FY21, mainly due to higher operating costs, consistent with ongoing inflationary trends.
• Earnings per share stood at $0.83, and Adjusted earnings per share stood at $1.03 for Q1FY22.

Source: Company Reports, Analysis by Kalkine Group

Key Update

• On 3 March 2022, the company released the upsizing and pricing of a $300 million offering of 6.50% senior notes due 2027. The principal amount has been increased from $250 million.

Outlook

The company forecasts net sales to be flat, Adjusted earnings per share between $3.00-$3.30 and Adjusted EBITDA of $560-$590 million for FY22. The existing operating environment remains highly volatile. However, the company will continue to offset current headwinds through additional pricing and cost reduction opportunities in 2022.

Key Risks

The company is exposed to the risk of currency fluctuations, which may adversely hurt its financial performance. In addition, volatility in production costs, primarily the raw material prices, could erode its profit margins. Further, the risk of changes in the retail environment and consumer preferences also remain a significant concern. Moreover, it faces the risk of supply chain disruption due to its reliance on certain essential suppliers.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The company has delivered a 6-month and 1-year return of ~-24.06% and ~-32.39%, respectively. In addition, the stock is trading lower than the average of the 52-week high price of $51.37 and the 52-week low price of $30.79.

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation, and the target price so arrived reflects a rise of low double-digit (in % terms). Accordingly, a slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average), considering solid FY22 guidance and focused pricing strategy.

Considering the higher battery demand, along with strong organic growth and decent outlook, we give a “Buy” recommendation on the stock at the closing market price of $30.20 per share, down by 4.55% as of 7^th March 2022.

Energizer Holdings, Inc. (ENR) is a part of Kalkine’s Global Fully Charged Product

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.